Good Riddance, Summer!
Well, another hard session for the bears. I see a lot of bears throwing in the towels in the comment section. Sad, sad.
Well, let's take a step back and look at the bigger picture. Here's the $OEX. It's getting back to to a pretty major Fib retracement level. We are way below the all-time highs set back during the bubble, so there's a fair bit of overhead resistance. We did not, however, have a double top, as I speculated we might yesterday.
The $INDU had an especially strong day. We are just 300 points away from the all-time high set back in January 2000. Can you imagine the headlines if we got to a lifetime high? Jesus. Reporters are running around like crazy as it is just because we're at three month highs on the major indices.
The $SPX has done a yeomans's job fighting its way up the wall of worry. It's discouraging but astounding to behold.
I will now cast off everything I hold dear, grab an air sickness bag, and offer up the only charts I could muster that look bullish, at least for the short term. Here we go.
ALL:
CP:
SHLD:
UNP:
The market hasn't been much fun to trade for bears since mid-July. It's been a real drag, actually, for six weeks now. If September - the month of the bears - doesn't turn things around in a major way, we should all sign the Declaration of Insanity that the rest of the world has apparently agreed to and just move on........
33 comments:
Tim, I was using Prophet and noticed something new tonight, that when I draw a trendline the %angle comes up, can you tell me what it means, or does it have a technical use? thanks.
Cheer up, Tim. Things are bound to get worse.
~ Nona
I enjoy your writing on every trading day. Traders need bear views to banlace their thinking.
Could you share which blogs you read mostly? Thanks
Danny
Whatever trading systems you use, unless they show buy, buy, buy.....you might as well throw them in the darned rubbish bin (does that include phrophet?)Nothing counts for nothing these days. Dow 12000 is the next restitance. The bear case is now a wash out. Only a nuclear bomb can stop the rot
"Whatever trading systems you use, unless they show buy, buy, buy.....you might as well throw them in the darned rubbish bin"
Hahahaha! Classic stuff, nosedive.
That's so very true! For the last 3 weeks STRAIGHT, if you weren't BUYING, then you weren't making money (generally speaking).
I love it. All the charts showed huge resistance levels, rising wedges, low volume, etc. All bearish signs, yet the markets went up and up and up as if everyone was hoarding their shares like they were gold.
Actually, gold actually went DOWN in the last 3 weeks, so stock shares were actually more precious than gold.
Go figure.
-Tony
"the market can stay irrational longer than you can stay solvent"
Here we go again, time for the group to be bored with my analysis.
Interesting things happened this week. Earnings on the S&P we raised by 8 cents, the S&P rose from 1295 to 1311, reducing the "yield" or discount rate for future earnings from 13.07% to 12.97%. Fortunately, the yield of the 10 year fell from 4.79% to 4.73%. That makes the spread or increase return from stocks at 8.24% versus last week's 8.28%.
Still, the spread favors stocks by a wide margin. The average spread since 1982 has been 4.89%, with a high of 9.96% in Aug of 1982 and a low of 0.57% in April 2002. The consistent long string of low spreads occurred between April of 1999 and February of 2000, with an average of 1.56%.
If the spread were to go back to the average of 4.89%, the fair market value of the S&P 500 would be about 1,970, assuming the 10 year yiuelds were unchanged at 4.73%. If the 10 year were to decline in value, causing yields to rise to 6%, the fair market value of the S&P at the acverage spread would be 1,672, still a substantial increase from current levels.
What could hurt is a decline in profitability. If profits were to decline by 15% to 66.70, but the spread revert to the average, the S&P vaule would be 1,670, assuming the 10 year yields stay constant.
If the spread were to go back to the high of 9.96%, and the 10 year stay constant, the S&P probably would decline to 1,095, which I see as maximum downside.
So, that's the range I see at maximum...1095 to 1970. Pretty wide range, but the risk is that I have underestimated the upside. If the S&P were to go to the spread witnessed in 1999, the value would be 3,200.
As they say, buckle up, we may be in for quite a ride.
Good Luck...
John B
jblack010@gmail.com
John and EddieFl,
Thank you very much for your detailed comments.
Gemma S.
Wow John! --- you're effin' crazeeey!!! 1970 on the S&P and you think you might have undervalued it? We're at the top of the profit cycle for christ's sake and bonds are REALLY OVERVALUED. So we're priced for perfection at 1300. Your anal-y-sis is good, but it damn well near gave me a heart-attack!
-Waiting for a sell-off to go long!
Everyone is waiting for the sell off to go long...bet we don't get much of a sell off.
John B
I read this blog a lot (and I really like it - thank you all), and one thing is strangely absent from the bearz here - GOOG. Google is a market sentiment stock and it's headed for a fall (both on it's own AND due to market sentiment.) I have played it twice to the downside so far (from 440 to 400 in late May, and from 420 to 385 in July), however, I'm not on either side at the moment. It's just that I don't ever see/hear much on this one, and with such bearish sentiment floating around it seems like a natural. I guess the RUT is kinda the same.
Happy Hunting
Short Google
I don't mention GOOG anymore because it's godawful boring. If it were a normally priced stock, like $40, you'd see it move just a few pennies or up down a day. There WAS a time when it was a dynamo, but God, I think that most electric utility companies are more volatile than Google.
I would agree with Costas. Sounds like capitulation on this board. Hmm . .
Re: Short Google - What bearish sentiment? Tim just acknowledged that the bears on this board have thrown in the towel. If you're looking for bearish sentiment, you should have seen this board 3 weeks ago . .
If anything, now everybody is bulled up.
Well everyone I just love this site, because I love bears!' My reason for commenting is that the target price that I have calculated on the S&P is 1323.38 that is basically a 99% retracement of the entire move down from 1326. Look for a drastic move to the downside at this point, and it could happen sooner, but this is an extended correction from what I see, and have calculated, Good luck to all, and keep on blogging, you'll make my trading so much more fun, Thanks! #
What happened to the arguments of market direction? Do we all agree now? I love reading about shorting GOOG today and on the same blog discussions about earning spreads historically from 1982. I'm sure neither one will ever be incorrect when your using completely different perspectives. "GOOG been flat this last week" followed by "but it’s up big since the IPO"
Tim's looking for short term volatility and the conversation is about an S&P range of 1095 - 1970. Do you think we can trade that range this coming week being it's only 4 days?
test
test
John Mauldin has an interesting chart of S&P 500 for 2000 in his latest newsletter. S&P 500 rebounded to near previous high on Sep 1 that year and then sold off.
Has anyone actually charted the individual stocks in the Dow and the most major stocks in the Naz just to see if they can justify the current price levels or where they might be going from here?
Yes, that's a pretty big job. But there must be a way to automate it a little bit. At least maybe a spreadsheet of the current market leader P/E ratios and forward guidance.
Everyone seems to be working in the dark here, guessing on which direction the markets will go. But nobody really has looked seriously into the Dow components or the big hitters in the S&P/Nasdaq to see if they really ARE overvalued or expected to decline.
Just my thoughts.
Jerry B.
To all:-
Yes volume has been low recently on the uptrend. Yes the market is overbought according to technical standards. Yes all the news is bad and its reckoned to get worse. But..........none of that appears to count for anything, because its sentiment, sentiment, sentiment thats driving the markets. Completely irrational, yes, but still enough to continue carrying the trend up to test and BREAK those highs. Those traders/bulls/speculators/ manipulators, call them what you will, THEY DONT WANT to see the markets fall. That would dent Joe public confidence so much that a recovery rally would be a long long way off. The institutions/pension funds etc etc dont want negative instability - steady upward trend is what they want. So those in profit, arnt generally short term sellers - the few that are cant dent the indices (only vulnerable individual shares). Sorry folks, but no sell off! Just a few down days in an upward trend over the next few months or more
Tony - your last post was spot on, as usual. We seem to be like minded in at present
costas - please, im noy QUITE a bull, just a quivering, battered imobile jelly bear........with all the stuffing knocked out.......
100-200 points pullback this month would be good and healthy for the bulls, expect market rally after 3rd quarter earnings report in Oct.
DOW
Tim, love the blog, the interaction, and your dry wit. However, after following and occasionally posting here for about five months, I have to voice a critical observation. To me, the hallmark of a sucessful trader is the ability to adapt to what is happening in the market; to abandon the ego, and keep an open mind. You've been stubbornly bearish for months, while stocks have refused to break down hard. Meanwhile, those willing to heed market forces far greater than their personal forecasts have turned a tidy profit on the long side. Personally, I think we've got another 1-3 weeks of upside before a traditional fall correction ensues-- but I won't hesitate to adjust my opinion if the market shows me otherwise. I also doubt we'll collapse to the extent you envision when we do correct--whether we "should", or not. Open minds lead to fat wallets. Cheers.
chanon - agreed a small pullback would in fact be HEALTHY for bulls, letting off some of the profit excesses is the sign of a sustainable bull market
Last poster also valid comments as well. Sticking doggedly to a bearish mantra has cost be very very dearly. I shalnt be doing that again.
EddieFL "Your welcome Gemma S. I may have left the "creaming in thier pants" part of my post off, if I new there were ladies in here reading our blog."
Comments such as the above lend a scintillating tone to the blog....
Give up bears. The bulls showed us all how wrong we are. The markets will continue to rally for NO reason so hop on the boat long. I give up.
"Give up bears. The bulls showed us all how wrong we are. The markets will continue to rally for NO reason so hop on the boat long. I give up."
Good for you. Naz 3000 would be, after all, only a 50% retracement of the '00 top to the '02 bottom. Now why is that so unlikely, from a technical perspective?
All you quivering jelly bears!!! What gives?? You're just a small little baby bear! Wait 'till pappa bear eats you and the bull for lunch. Let's keep the big picture in mind! IT'S A BEAR!!! Even on the infamous black monday, stocks managed to climb within a 100 point loss. So this little rally is weak for many reasons and will NOT HOLD. It's time to short, not join the bull camp! Go ahead, be macho and stay long for the next hundred points! But the undertow will take you down quick.
Trader Fred
Should see some nice action to the downside this week.
The Trader II
Ding ding ding ding!!!
It's 10 AM EST. Time for the markets to start floating up.
Whats up with PCU????? up 3.5 bucks....
Overbought, yes.
Falling? No.
PMs have just started their end-of-year run. Jump on board gold and silver while you still can.
Program buying begins again at 10:20.
Caller A: Go ahead.
Caller B: Yes Boss.
Click.
Now, When they take out this liquidity. Watch out. But until then Ride it up.
PPT RULES.
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